I am looking at the “recent acquisitions of developed gold ounces” chart and the point I find most striking is that the “World Exploration Spending” has been in decline since 1997. It decreases from roughly 4.5 billion USD to a mere 2 billion USD over 3 years. That figure would be even more emaciated if adjusted for inflation! It would be interesting to see the updated version of this chart and whether or not this trend has continued to the present day.
Companies require expenditure in order to locate future gold deposits therefore the funds allocated for the discovery of new ore deposits should reflect the companies level of interest. The demand for gold has never been higher than it is today. The article also states that “The best exploration geologists no longer work for the big companies. They work for and own the smaller, more nimble outfits – the junior resource companies.” This implies that the “World Exploration Spending” has indeed continued its decline. Junior companies are not being funded and the mature mining companies are suffering from a lack of experienced geologists resulting in a decline in new discoveries.
http://www.goldsheetlinks.com/production.htm
These charts convey a similar picture. The global output of gold has declined from 2518mt in 2005 to 2356mt in 2008. In theory, a fall in supply and a rise in demand should see gold stock prices rise along with physical prices. The reality is far more perplexing.
Given the relative ease of credit flow over the past 10 years it is baffling that these junior companies have not been able to expand their business. With the onset of the credit crisis, it’s as if a hidden hand has slammed shut the door and sealed their fate.
The article states a lot of facts. It is easy to see how the author has arrived at his conclusion, that is, the gold sector is due for a massive turnaround. Does fact equal truth? Are his conclusions truth?
According to the dictionary,
FACT is something that actually exists; reality; truth TRUTH is Conformity to fact or actuality.
It could be surmised that fact is indeed truth and therefore it’s a safe bet that gold stocks will turnaround.
This is the second fallacious interpretation of a word I’ve come across in as many weeks. The other is the word “patriot” which had its’ meaning hijacked sometime over the last 150 years. It originally meant “a person who regards himself or herself as a defender, esp. of individual rights, against presumed interference by federal government.” It was amended to the paradoxical view “a person who loves, supports, and defends his or her country and its interests with devotion.” The people who fought and died in the civil war were fighting for individual rights, they were true patriots. Those familiar with socio-economic models such as Hegelism, Marxism and Social Corporatism will know why the interpretation of patriotism had to be changed.
Fact is not Truth. Here is an example. Joe has worked in supermarkets for many years. During the course of the night Joe has on average 14 trolleys of stock to fill in a 3 hour period however, due to the amount of items in each trolley it would require no less than 5 hours to fill. Joe cannot possibly get the stock on the shelves in 3 hours and so Mary is told to help him out. During the course of the night Mary sees that Joe is filling the easiest trolleys and that her trolleys are the most difficult and so she decides to confront Joe. Joe explains that he fills the trolleys from left to right. Mary concedes because she can see that Joe has stated a fact. He couldn’t possibly be deliberately filling the easiest trolleys of stock. Joe failed to tell Mary that he is responsible for the initial order of the trolleys and has misled Mary. Joe has lied to Mary through omission of this fact. The truth of the matter can only be derived from knowledge of all facts!
In light of this we must look for any hidden facts so that we are NOT misled. Why have junior companies been unable to expand their business despite the free flow of credit over the last 10 years? Why have the larger companies cut their exploratory budget? Why are the stock prices of gold companies not reflecting their underlying asset? I could probably list a page full of questions, all of which can be answered easily if we examine the economic system.
I’ve already written several articles on the economic system for hotcopper subscribers. In these articles I outline the relationship between governments, Central banks, the International Monetary Fund, financial institutions and the public. Since 1913 Americans have been operating under the guise of rules they do not understand. The Fractional reserve banking system is designed to transfer the REAL wealth of the nation from the people to the Large banking institutions and it does this through the charging of interest. When I mention REAL wealth I am referring to land and resources. Very few nations on this planet are not under the duress of central banks! It is inconceivable not to account for the taint of fractional reserve banking when investing!
By 2008, 2% of Americans owned their own house, 1% owned their own car and 60% of Americans hold at least 3 credit cards maxed to the limit! In 2005 Americans also hit a negative savings rate for the first time since the great depression! These figures state that the average American is bankrupt and cannot absorb any more debt. They are well and truly fleeced of their wealth. Those who still believe that this is a lending crisis need to be realistic. If and when the large banking institutions decide to leverage again it will only be to fleece the rich and it will only be for a limited time.
So how does this fit in with gold stocks? Gold is in demand which means gold stocks should also rise! If I am an elite banker and I have designed a system that transfers the real wealth of the nation to my balance sheet why would I finance gold mining companies? If I were to finance those companies they would inevitably produce gold to be sold on the market and thus allow smarter players a means of protecting their wealth. It is comparable to trying to catch butterflies by using a shabby ripped up net. If you are in the business of bank robbing you must ensure that the gold is in the bank so that it’s there to be robbed!
It is a well known fact that the gold markets are being manipulated. J.P Morgan and HSBC have $120 billion in gold short contracts in spite of mounting pressure within the price of gold. Even if they close their positions they stand to lose billions. It is also known that Commex has sold short more positions than it has gold. The reason it can do this is because when gold is bought and sold the ownership is simply transferred via fancy bookkeeping. Commex would go bankrupt if all parties decided to settle and have their gold shipped.
Adweb posted an article on the 31st declaring that J.P Morgan took delivery of 502 of the 503 silver contracts. The fact that J.P Morgan is taking DELIVERY should send alarm bells off in savvy investor heads. What happens to J.P Morgan and HSBCs’ short positions if Commex were to go bust? Let us postulate that that is not their intention and they are simply taking delivery on behalf of a client. The short positions will eventually have to be closed and they can always scream BAILOUT for any loss they incur. There is only one problem with this strategy, the gold and silver will end up back in the hands of the entity who offered them up for selling short. Would it not be smarter to utilize friendly aligned institutions to buy up the gold and silver contracts as they are being sold short and then force Commex into bankruptcy by taking delivery and voiding the outstanding short position? Is this a plausible scenario given what we know about the economical model and the intentions of the banking elite?
